The Economic Development of Low-Earth Orbit (NASA Book)

©NASA

Cubesat deployment from ISS

This collection of papers identify a number of important policy questions that will be of rising importance as NASA transitions LEO to the private sector, as well as a number of economic analysis methods of addressing those questions.

Although far from a comprehensive assessment of the opportunities and challenges inherent in the continued, private-sector-led economic development of human spaceflight in LEO, this collection represents an impressive level of knowledge and insight. It is our hope that this volume may serve to guide decisions and spark the intellectual curiosity of space policy makers, NASA managers, and economic researchers, and all others interested in the continued economic development of human spaceflight.

Download PDF Note: this is an early draft of the final report and contains formatting and spelling errors. NASA's NTRS released the report on their website. The final report is due to be released by NASA in April 2016 and will be posted here.

Preface

Patrick Besha, Editor
Alexander MacDonald, Editor

In the next decade, NASA will seek to expand humanity's presence in space beyond the International Space Station in low-Earth orbit to a new habitation platform orbiting the moon. By the late 2020's, astronauts will live and work far deeper in space than ever before. The push to cis-lunar orbit is part of a stepping-stone approach to extend our reach to Mars and beyond. This decision to explore ever farther destinations is a familiar pattern in the history of American space exploration.

Another major pattern with historical precedent is the transition from public sector exploration to private sector commercialization. After the government has developed and demonstrated a capability in space, whether it be space-based communications or remote sensing, the private sector has realized its market potential. As new companies establish a presence, the government withdraws from the market.

In 2015, we are once again at a critical stage in the development of space. The most successful long-term human habitation in space, orbiting the Earth continuously since 1998, is the International Space Station. Currently at the apex of its capabilities and the pinnacle of state-of-the-art space systems, it was developed through the investments and labors of over a dozen nations and is regularly re-supplied by cargo delivery services. Its occupants include six astronauts and numerous other organisms from Earth's ecosystems from bacteria to plants to rats. Research is conducted on the spacecraft from hundreds of organizations worldwide ranging from academic institutions to large industrial companies and from high-tech start-ups to high-school science classes. Its operational lifetime will be exceeded by the late 2020's, however, compelling its retirement to make way for new spacecraft and new missions. In the current strategy, NASA will begin moving astronauts out to cis-lunar orbit and beyond in the 2020s, leaving the further development of lowEarth orbit to private sector companies.

As NASA moves its human spaceflight activities out to cis-lunar space, it may be that NASA maintains a demand for human spaceflight activities in low-earth orbit. However, it is also possible that NASA's human spaceflight requirements will be met entirely by flights in cis-lunar and deep space, thus leaving the further development of low-earth orbit spaceflight activities entirely to the private sector and other government agencies. This has the potential to be a historic transition from a government-run laboratory in orbit to an independent human spaceflight economy.

In order for a viable, sustainable economy based on human spaceflight to emerge in low earth orbit (LEO), a number of elements must be present. First, the marketplace dynamics of supply and demand must exist. Second, the overwhelming reliance on government demand and public procurement must be transitioned to a market in which industry and other private-sector demand is the primary market force, met by industry supply. The transition from government-led to private-sector-led human spaceflight activity in LEO will constitute a great experiment in the development of American spaceflight capabilities and the careful management of the dynamics of this transition will be of paramount importance.

NASA has taken a number of productive steps to support the fledging human spaceflight industry, including several programs aimed at supporting private sector firms' development of essential space infrastructure and transportation. Examples include Commercial Orbital Transportation Services (COTS) program, which funded both SpaceX and Orbital ATK (formerly Orbital Sciences) to develop a capability to ferry cargo from Earth to the ISS. Building upon its success, the Commercial Crew Program will fund Boeing and SpaceX to develop spacecraft capable of transporting astronauts to the ISS.

Similarly, NASA established the Center for the Advancement of Science in Space (CASIS) in 2011 to be the manager of the ISS National Laboratory. Given direction to fund commercial R&D, the Center has seeded hundreds of projects that have flown in space. As the primary portal for companies interested in utilizing the ISS, CASIS is crucial to expanding private sector interest in LEO.

As the overall strategy for the economic development of LEO emerges, NASA asked a small group of prominent economists to examine some of the most important questions facing the agency as it enters into this historic transition of LEO human spaceflight capabilities to the private sector.

A top-level innovation-systems approach to the problem is proposed in an essay by Mariana Mazzucato and Douglas Robinson. They suggest that NASA should seek to foster a robust innovation and industrial policy ecosystem to achieve mission-focused goals in LEO. Such goals would include NASA at the forefront of strategic, high-risk investments in the near-term and channeling any resulting technology or knowledge to the private sector to spur economic growth.

In this new, NASA-driven innovation ecosystem, the agency will need a policy roadmap in order to make the best technology development decisions. Gregory Tassey offers a complex and logical path to success, by outlining a system of policies based on the level and breadth of technology platforms desired. Such a plan could be used to implement elements of an active innovation policy and to integrate NASA's effort more closely to the national innovation system.

How will innovative companies emerge? Josh Lerner, Ann Leamon and Andrew Speen present a detailed examination of venture capital interest in the sector. While investors are perhaps understandably less cognizant of the opportunities LEO offers, VC may be an important source of funding for early-stage companies once the market matures. Furthermore, the emergence of significant near-term start-up successes that utilize human spaceflight capabilities in LEO could spur increased VC investment in the sector.

What are the costs, both in time and money, associated with commercial operations in space and how does knowing - or not knowing - that information effect investment decisions? To answer this crucial question, the Nobel Prize-winning economist Eric Maskin and Albert Link consider the current R&D environment on the ISS, with a goal to offer policy suggestions for improvement. They find that a lack of information about past projects, experimental success rates and the process in general were major factors inhibiting both R&D and commercial growth. Without such information, researchers and companies were unable to accurately assess the risks involved. The solution? An easily searchable, highly transparent database could provide the necessary information to lower the barrier to entry for commercial operations in space.

Nicholas Vonortas examines a crucial piece of the puzzle what intrinsic qualities of space enable and support economic activity? He finds that the unique microgravity environment of space is perhaps its greatest value. One of the most likely beneficiaries of microgravity research may be the biotech industry, yet past efforts have yielded no major breakthroughs. A promising line of research suggests that the microgravity environment enables protein crystals to be grown significantly better than in terrestrial laboratories. Such crystals play a fundamental role in pharmaceutical drug development. But how can we measure the additionality of microgravity? How might it improve pharmaceutical development? The paper raises many vital questions and represents an excellent, practical application of economic theory to a vexing problem in the emerging LEO economy.

This collection of papers identify a number of important policy questions that will be of rising importance as NASA transitions LEO to the private sector, as well as a number of economic analysis methods for addressing those questions. Although far from a comprehensive assessment of the opportunities and challenges inherent in the continued, private-sector-led economic development of human spaceflight in LEO, this collection represents an impressive level of knowledge and insight. It is our hope that this volume may serve to guide decisions and spark the intellectual curiosity of space policy makers, NASA program managers, economic researchers, and all others interested in the continued economic development of human spaceflight.

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